IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/115749.html
   My bibliography  Save this paper

Using Demand Transfer Ratios to Infer Market Impacts of New Goods

Author

Listed:
  • Gayle, Philip
  • Lin, Ying

Abstract

This paper introduces a measure we call a “demand transfer ratio” (DTR) that is a useful metric for inferring and communicating important market impacts associated with new product introductions. We show that the sign and magnitude of the demand transfer ratio can be used to infer whether the presence of new goods expanded aggregate demand in the relevant market and/or have a demand-cannibalizing effect on pre-existing products. In principle, our unit free DTR metric can be computed for the introduction and presence of new products across a wide cross section of industries for the purpose of comparing the demand transference impacts of various technology innovations and further studying what measurable attributes, strategies, and/or policies are associated with the most impactful innovations in an economy.

Suggested Citation

  • Gayle, Philip & Lin, Ying, 2022. "Using Demand Transfer Ratios to Infer Market Impacts of New Goods," MPRA Paper 115749, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:115749
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/115749/1/MPRA_paper_115749.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Philip G. Gayle & Ying Lin, 2022. "Market effects of new product introduction: Evidence from the brew‐at‐home coffee market," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(3), pages 525-557, August.
    2. Ivaldi, Marc & Verboven, Frank, 2005. "Quantifying the effects from horizontal mergers in European competition policy," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 669-691, December.
    3. Ivaldi, Marc & Verboven, Frank, 2005. "Quantifying the effects from horizontal mergers: Comments on the underlying assumptions," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 699-702, December.
    4. Hausman, Jerry A & Leonard, Gregory K, 2002. "The Competitive Effects of a New Product Introduction: A Case Study," Journal of Industrial Economics, Wiley Blackwell, vol. 50(3), pages 237-263, September.
    5. Hausman, Jerry, 1999. "Cellular Telephone, New Products, and the CPI," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(2), pages 188-194, April.
    6. Austan Goolsbee & Amil Petrin, 2004. "The Consumer Gains from Direct Broadcast Satellites and the Competition with Cable TV," Econometrica, Econometric Society, vol. 72(2), pages 351-381, March.
    7. Amil Petrin, 2002. "Quantifying the Benefits of New Products: The Case of the Minivan," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 705-729, August.
    8. Jerry A Hausman & Gregory K Leonard, 2002. "The Competitive Effects of a New Product Introduction: A Case Study," Journal of Industrial Economics, Wiley Blackwell, vol. 50(3), pages 237-263, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Anindya Ghose & Sang Pil Han, 2014. "Estimating Demand for Mobile Applications in the New Economy," Management Science, INFORMS, vol. 60(6), pages 1470-1488, June.
    2. Philip G. Gayle & Ying Lin, 2022. "Market effects of new product introduction: Evidence from the brew‐at‐home coffee market," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(3), pages 525-557, August.
    3. Peter Davis & Pasquale Schiraldi, 2014. "The flexible coefficient multinomial logit (FC-MNL) model of demand for differentiated products," RAND Journal of Economics, RAND Corporation, vol. 45(1), pages 32-63, March.
    4. Bokhari, Farasat A.S. & Mariuzzo, Franco, 2018. "Demand estimation and merger simulations for drugs: Logits v. AIDS," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 653-685.
    5. Kim, Donghun, 2004. "Estimation of the Effects of New Brands on Incumbents' Profits and Consumer Welfare: The U.S. Processed Cheese Market Case," Research Reports 25192, University of Connecticut, Food Marketing Policy Center.
    6. Robert Clark & Yiran Gong, 2021. "Why Do Some New Products Fail? Evidence from the Entry and Exit of Vanilla Coke," Working Paper 1475, Economics Department, Queen's University.
    7. Stoneman, Paul, 2011. "Soft Innovation: Economics, Product Aesthetics, and the Creative Industries," OUP Catalogue, Oxford University Press, number 9780199697021.
    8. Mitsuru Sunada, 2005. "Welfare effects of quality change and new products in the Japanese mobile telecommunications market: 1995-2001," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 14(8), pages 715-733.
    9. Jerry Hausman, 2002. "Sources of Bias and Solutions to Bias in the CPI," NBER Working Papers 9298, National Bureau of Economic Research, Inc.
    10. Yanghao Wang & Metin Çakır, 2020. "Welfare impacts of new demand‐enhancing agricultural products: The case of Honeycrisp apples," Agricultural Economics, International Association of Agricultural Economists, vol. 51(3), pages 445-457, May.
    11. Jerry Hausman, 2003. "Sources of Bias and Solutions to Bias in the Consumer Price Index," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 23-44, Winter.
    12. Leheyda, Nina, 2008. "Private Incentives to Innovate: Interplay of New Products and Brand-Name Reputation," ZEW Discussion Papers 08-120, ZEW - Leibniz Centre for European Economic Research.
    13. Hersh, Jonathan & Voth, Hans-Joachim, 2022. "Sweet diversity: Colonial goods and the welfare gains from global trade after 1492," Explorations in Economic History, Elsevier, vol. 86(C).
    14. He, Wentao & Hao, Xiaoli, 2023. "Competition and welfare effects of introducing new products into the new energy vehicle market: Empirical evidence from Tesla’s entry into the Chinese market," Transportation Research Part A: Policy and Practice, Elsevier, vol. 174(C).
    15. Keaton Miller & Boyoung Seo, 2021. "The Effect of Cannabis Legalization on Substance Demand and Tax Revenues," National Tax Journal, University of Chicago Press, vol. 74(1), pages 107-145.
    16. Federico Ciliberto & GianCarlo Moschini & Edward D. Perry, 2019. "Valuing product innovation: genetically engineered varieties in US corn and soybeans," RAND Journal of Economics, RAND Corporation, vol. 50(3), pages 615-644, September.
    17. Amit Gandhi Gandhi & Zhentong Lu & Xiaoxia Shi, 2013. "Estimating demand for differentiated products with error in market shares," CeMMAP working papers 03/13, Institute for Fiscal Studies.
    18. Ivan Moreno-Torres, 2011. "What if there was a stronger pharmaceutical price competition in Spain? When regulation has a similar effect to collusion," Working Papers XREAP2011-02, Xarxa de Referència en Economia Aplicada (XREAP), revised May 2011.
    19. Jerome Foncel & Marc Ivaldi & Jrisy Motis, 2008. "An Econometric Workbench for Comparing the Substantive and Dominance Tests in Horizontal Merger Analysis," Working Papers 0833, University of Crete, Department of Economics.
    20. Arnade, Carlos & Kuchler, Fred, 2015. "Measuring the Impacts of Off-Season Berry Imports," Economic Research Report 229201, United States Department of Agriculture, Economic Research Service.

    More about this item

    Keywords

    Demand transfer ratios; New product introduction; Aggregate demand expansionary effect; Demand-cannibalizing effect; Innovation and Technological Change; Environmental Policy;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:115749. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.